Margo N. Alexander is convinced that the problems that plagued Mitchell Hutchins Asset Management when she became its CEO in 1995 are finally over.

Now she must convince an even tougher audience that the turnaround she engineered is complete: the 6,739 brokers who work for Mitchell Hutchins' parent, PaineWebber Inc.

"It took some time to reposition ourselves," Ms. Alexander, 51, said. "But we're back in business with room to penetrate the brokerage."

For 18 months more assets have been flowing into Mitchell Hutchins than out of it, she said. That is a switch from the early 1990s, when well- publicized problems, including poor investment performance and personnel defections, caused significant asset outflows.

So Ms. Alexander has set new objectives for Mitchell Hutchins, which has $54.1 billion of assets under management. About 25% of the portfolios sold by PaineWebber's brokers are managed by the firm. Her goal: increase that to 35% to 40%.

"Our first line for customers is our brokers," Ms. Alexander said. "They sell a lot of mutual funds and they sell a wide variety of mutual funds- Putnam, AIM, American Century.

"We want to be one of the key resources the brokers look at."

It is all part of a plan to boost Mitchell Hutchins' assets under management to $80 billion by 2000. Like scores of other brokerage firms and banks, PaineWebber Inc. has identified asset management as a potentially rich source of reliable fee income.

"It's a good margin business," Ms. Alexander said. "We are one avenue of delivering to PaineWebber clients value-added investment advice."

In the third quarter asset management revenues at PaineWebber rose 30.3%, to $184.7 million, versus a year earlier. The business represented 10.2% of total revenues of $1.81 billion in the quarter, compared with 8% a year earlier.

With $29.9 billion of assets under management, money market mutual funds represent the bulk of Mitchell Hutchins' mix. Another $12.5 billion is held in long-term stock and bond mutual funds, while institutional accounts represent $11.7 billion.

Ms. Alexander-who began her career as a Mitchell Hutchins analyst in 1973-has not ruled out buying an asset management firm. She is largely satisfied with the unit's product line, though there are gaps, such as the ability to manage international equities in-house.

But instead of offering "every product in the world," Ms. Alexander would rather focus her attention on rebuilding Mitchell Hutchins' relationship with PaineWebber's brokers.

Already harmed by rampant turnover and other management problems at Hutchins, trust between the two groups almost totally disappeared in 1994, when one of the firm's top-selling government bond funds blew up after the Federal Reserve Board raised interest rates.

By the time Ms. Alexander was plucked from PaineWebber's institutional equities business for the top spot at Mitchell Hutchins, the asset management unit's portfolios represented less than 10% of the brokerage's fund sales.

"Burned once, captive investment reps are forever afraid," said Joy Montgomery, president of Money Marketing Initiatives, Basking Ridge, N.J. "Internal perceptions are much harder to change than external ones."

Ms. Alexander-whose tenure at PaineWebber has included stints as head of equity research and co-head of equities-moved quickly to rebuild the investment process. And she has met with some success.

On an asset-weighted basis, 80% of the firm's mutual funds finished in the top half of their categories and 48% finished in the top quartile, based on yearend rankings from Lipper Analytical Services.

Observers say she also made several smart hiring decisions, including wooing Brendan Boyle from Prudential Investments to be her marketing chief.

"Brendan Boyle is absolutely a top-notch person," said Burton Greenwald, a mutual fund consultant in Philadelphia. The problems of the early '90s "would not have happened under his watch."

Today, Ms. Alexander reports that there "is a lot of momentum with PaineWebber brokers." In addition to ensuring that performance stays on track, she is intent on catering to the brokers' needs. During the market's recent turmoil, she said, Mitchell Hutchins' investment chiefs took to the phones to speak with brokers and their clients.

"We can afford to be attentive to brokers," she said. "They are our main conduit and they are tough judges. There is no extra benefit for the broker to sell our funds."

Though she was chosen to lead Mitchell Hutchins because of her skills as a manager, Ms. Alexander said her background in research and equities has served her well, making her well versed in investing and the markets.

Her long tenure at PaineWebber also helped. She is a member of PaineWebber's executive committee and reports directly to president Joseph Grano. Ms. Alexander states with confidence that PaineWebber is committed to the investment management business, even as the markets turn volatile.

For the future, Ms. Alexander said, she would like to continue improving Mitchell Hutchins' investment performance, well aware that a few quarters of good results do not a track record make. She also wants to continue to build the unit's institutional business and its wrap accounts.

"As much as I think we've achieved, every day I wake up and the list seems as long as it was," she said.

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